All 3 contributions to the Budget Responsibility Act 2024 (Ministerial Extracts Only)

Read Full Bill Debate Texts

Tue 30th Jul 2024
Wed 4th Sep 2024
Budget Responsibility Bill
Commons Chamber

Committee of the whole House
Mon 9th Sep 2024
Budget Responsibility Bill
Lords Chamber

2nd reading & Committee negatived & 3rd reading

Budget Responsibility Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
2nd reading
Tuesday 30th July 2024

(2 months, 1 week ago)

Commons Chamber
Budget Responsibility Act 2024 Read Hansard Text Watch Debate

This text is a record of ministerial contributions to a debate held as part of the Budget Responsibility Act 2024 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Darren Jones Portrait The Chief Secretary to the Treasury (Darren Jones)
- View Speech - Hansard - - - Excerpts

I beg to move, That the Bill be now read a Second time.

I congratulate you and welcome you to your place in the Chair, Madam Deputy Speaker. It is a privilege to open this debate in my first appearance at the Dispatch Box as a Minister in this new Labour Government.

At the general election, the British people voted for change, and this new Labour Government began work immediately to deliver on that mandate. Sustained growth is the only route to the improved prosperity that this country needs and to improve the living standards of the British people. After 14 years of Conservative failure, this work is urgent—it is now our national mission. To deliver on that mission, as my right hon. Friend the Chancellor set out days after taking office, we must fix the foundations of the economy and restore economic stability. She emphasised that commitment to delivering economic stability by meeting with the Office for Budget Responsibility soon after becoming Chancellor.

Under the legal framework we inherited from the Conservative party, there is no requirement on the Treasury to subject fiscally significant announcements to independent OBR scrutiny. We all experienced what happens when huge unfunded fiscal commitments are made without proper scrutiny and key economic institutions such as the OBR are sidelined. The country cannot afford a repeat of the calamitous mini-Budget of September 2022, when Liz Truss and Kwasi Kwarteng’s reckless plans unleashed economic turmoil that has loaded hundreds of pounds on to people’s mortgages and rents. Conservative Ministers put ideology before sound public money and party before country.

This Labour Government are turning the page: we will always put the country first and party second. Our commitment to fiscal discipline and sound money will never waver. That is why we are firmly committed to the independence of the OBR, and to the important principle that in normal times, the announcement of a fiscally significant measure should always be accompanied by an independent assessment of its economic and fiscal implications, in order to support transparency and accountability. That is why we made a commitment in our manifesto to strengthen the role of the OBR, and it is why we have acted quickly to deliver on that commitment today.

This action will reinforce credibility and trust by preventing large-scale unfunded commitments that are not subject to an independent fiscal assessment. As Richard Hughes, the chair of the OBR, reiterated in his recent letter to the Chancellor,

“it is a good principle of fiscal policymaking that major fiscal decisions should be based upon, and presented alongside, an up-to-date view of the economic and fiscal outlook”.

In line with this, the Chancellor yesterday commissioned a full forecast to accompany our Budget on 30 October, following the important principle that significant fiscal policy decisions should be made at a fiscal event and accompanied by an independent OBR assessment. That fiscal lock is an essential part of our mission to deliver economic stability. It is one of our first steps towards fixing the foundations of the economy, and it is our guarantee to the British people that this Labour Government are a responsible Government who will never play fast and loose with public and family finances, as the Conservative party has done before.

The Bill sets the legal framework for the operation of the fiscal lock. It builds on the Budget Responsibility and National Audit Act 2011, which established the OBR. In line with that, the technical detail underpinning the fiscal lock will be set out via an upcoming update to the charter for budget responsibility. The charter sets out the Government’s fiscal framework, including guidance on how the OBR performs its duties within that framework. To support scrutiny of the Bill during its passage through Parliament, the Treasury has published a draft of the relevant charter text, which will make clear exactly how the Government plan to implement the fiscal lock. A full update to the charter will be published in due course, and Members will vote on it in the usual way.

The Bill itself does five things to ensure that proper scrutiny of fiscal plans will take place. First, it requires the Treasury, before the Government make any fiscally significant announcement in Parliament, to request that the OBR presents an assessment taking the announcement into account. This builds on the usual process whereby the Chancellor commissions the OBR for an economic and fiscal forecast to accompany a fiscal event. It guarantees in law that, from now on, every fiscally significant change to tax and spending will be subject to scrutiny by the independent OBR.

Secondly, the Bill gives the OBR new powers to independently decide to produce an assessment if they judge that the fiscal lock has been triggered. If a fiscally significant announcement is made without the Treasury having previously requested a forecast from the OBR, the OBR is required to inform the Treasury Committee of its opinion and then prepare an assessment as soon as is practicable. That means that, come what may, the OBR, through Parliament, will be able to hold the Government to account.

Thirdly, the Bill defines a measure, or combination of measures, as “fiscally significant” if they exceed a specified percentage of GDP, with the charter then setting the precise threshold itself. Setting the threshold in this way provides clarity for both the OBR and external stakeholders about what constitutes a “fiscally significant announcement”—that is, when the fiscal lock has been triggered—and it ensures that the Government can set it at the right level going forward, recognising economic conditions. The threshold level will be set at announcements of at least 1% of nominal GDP in the latest OBR forecast. As an example, this year the 1% threshold would be £28 billion. This will ensure that we properly capture any announcements that resemble the growth plan of former Members Liz Truss and Kwasi Kwarteng in 2022, with the broader risks to macroeconomic stability that this entailed.

Fourthly, the Bill ensures that the fiscal lock does not apply to Governments responding to emergencies, such as the covid-19 pandemic. The Bill does so by not applying in respect of measures that are intended to have a temporary effect and which are in response to an emergency. The charter will define “temporary” as any measure that is intended to end within two years. This recognises that it is sometimes reasonable—for example during a pandemic—for the Government to act quickly and decisively without an OBR assessment, if that is needed in response to a shock. Of course, in emergencies it may be appropriate for the Chancellor to commission a forecast from the OBR to follow measures that needed to be announced or implemented rapidly, and that would happen in the usual way. Alongside any such announcement, the Treasury will be required to make it clear why it considers the situation to be an emergency. As set out in the updated charter, the OBR will have the discretion to trigger the fiscal lock and prepare a report if it reasonably disagrees.

Fifthly and finally, the Bill requires the Government to publish any updates to the detail of the fiscal lock—such as the threshold level at which it is triggered—in draft form at least 28 days before the updated charter is laid before Parliament. This is an essential safeguard in the Bill, preventing any future Government from choosing to ignore the fiscal lock by updating the charter without the consent of Parliament.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
- Hansard - - - Excerpts

The Minister is setting out the stark realities of where we are financially, which it is important that we all understand. Given that the financial positions of all of us within the United Kingdom could be fairly dramatically changed, regionally, it will be important that discussions with the Northern Ireland Assembly, the Welsh Assembly and the Scottish Parliament take place early enough for the impacts of what might happen to be better understood.

Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

I thank the hon. Gentleman for his contribution. As I am sure he knows, the Chief Secretary to the Treasury is traditionally the lead Minister in Government for relationships with the Finance Ministers in the devolved Governments. I have already met a number of times with counterparts in the Northern Ireland Executive, as well as those in Scotland and Wales. I look forward to meeting them in person in Northern Ireland, I hope in September, for further such discussions.

To conclude, people across the country are still suffering the consequences of the Conservative party’s economic experiment in 2022. Conservative Ministers took the most reckless decisions without any thought for their real-life impact on the British economy and on family finances. Astonishingly, they have still made no apology.

With this Labour Government, our commitment to fiscal discipline and sound money is the bedrock of our plans. The Budget Responsibility Bill guarantees in law that, from now on, every fiscally significant change to tax and spending will be subject to scrutiny by the independent OBR. The Bill will reinforce credibility and trust by preventing large-scale unfunded commitments that are not subject to the scrutiny of an OBR fiscal assessment. This delivers on a key manifesto commitment to provide economic stability and sound public finances by strengthening the role of the independent OBR. This is a crucial first step to fix the foundations in our economy, so that we can achieve sustained economic growth and make every part of the country better off.

For those reasons, I commend the Bill to the House.

--- Later in debate ---
James Murray Portrait The Exchequer Secretary to the Treasury (James Murray)
- View Speech - Hansard - - - Excerpts

I welcome your election to the Chair, Madam Deputy Speaker. It is a privilege to close this debate on the Budget Responsibility Bill on behalf of the Government. I thank all hon. Members for their contributions; in a moment I will address many of the points that they have raised.

Let me start by reminding the House why the Bill is so important and what it is designed to achieve. At the general election earlier this month, the British people voted for change. They voted to turn the page on 14 years of economic failure. People across Britain voted to remove the Conservatives from power. They voted to remove the party that crashed the economy, and whose Ministers we now know were reckless with the public finances right till the very end. People voted to give Labour the chance to serve. With that honour afforded to us, we have got to work straightaway in fixing the mess the previous Government left and getting our economy growing.

That economic growth is at the heart of our national mission as a Government. That growth underpins our plans in government to make people in every part of the UK better off and to get public services back on their feet in a sustainable way. We know that a crucial foundation for sustained growth is economic stability and fiscal responsibility. We have brought that stability and fiscal responsibility back into the heart of government. Our fiscal rules are non-negotiable. As the Chancellor set out yesterday, meeting them is a principle on which this new, Labour Government were elected, and that will guide her at October’s Budget.

But we want to go further in restoring the trust that was so badly damaged by the Conservatives during their time in office, by embedding fiscal responsibility not just into our country’s government but also into its laws. That is why one of the first Bills to be presented to the House of Commons by our new Government was the Budget Responsibility Bill whose Second Reading we are debating today. The Bill will hardwire fiscal responsibility into significant financial decisions of any future Government, and it will prevent any party ever again being able to play fast and loose with the public finances.

We saw under the previous Government what happens when politicians fail to show respect for taxpayers’ money. People across Britain are still feeling the impact of Liz Truss and Kwasi Kwarteng’s recklessness nearly two years on from the economic disaster they created. The Conservatives’ recklessness in 2022 showed just how much damage unfunded spending commitments can cause. Ministers at the time unleashed economic turbulence that pushed up people’s mortgages and rents and made people across Britain worse off, though it hit the least well-off the hardest. We must never let that happen again.

Budget responsibility must never be optional. That is why Labour will hardwire this responsibility into Government through our fiscal lock, which will mean that all significant fiscal announcements in future will be guaranteed independent scrutiny from the Office for Budget Responsibility. This Bill empowers the OBR to independently produce an assessment of a Government’s fiscal plans if it judges that the fiscal lock has been triggered. That will make sure that there is always proper scrutiny of a Government’s fiscal plans, and guard against large-scale unfunded commitments and disasters such as the Conservatives’ so-called mini-Budget ever happening again. This Bill is a crucial step in fixing the foundations of what we have inherited.

I will take a pause from focusing on the substance of the Bill to thank so many hon. Members for their truly excellent maiden speeches. We had a real tour around Britain, and I feel I have got to know places in all corners of our country through their passionate speeches about the places and people they are all so proud to represent.

We began with my hon. Friend the Member for Glasgow North (Martin Rhodes), who spoke about Kelvingrove park, which I went to when I visited Glasgow. He spoke about the serious work of Government, and the importance of delivery and rebuilding trust in politics.

My hon. Friend the Member for East Renfrewshire (Blair McDougall) said that the hard decisions we make today are what create a better tomorrow. There is no better summary of the position we find ourselves in today. He spoke passionately about the history of his constituency and the importance of a better future for the next generation.

The hon. Member for Carshalton and Wallington (Bobby Dean) spoke movingly about his upbringing and how it has influenced his politics. He also spoke about his anger at the previous Government’s recklessness. I have to say that while I enjoy going to the pub when there are big games on, I do not know that much about football, so I actually understood the fiscal bit of his speech more than the football analogy.

James Murray Portrait James Murray
- Hansard - - - Excerpts

I am just being honest—honesty in politics!

My hon. Friend the Member for Southend West and Leigh (David Burton-Sampson) made a very important point that we should all heed about civility in politics. He spoke about the diverse community spirit in his area, but I am not going to even begin to compete with him on how impressive the coastline is in my landlocked suburban constituency.

The hon. Member for Chichester (Jess Brown-Fuller) spoke about how special and sunny her constituency is. She began a new competition; now it is not only who has the most beautiful constituency, but the sunniest. I was very touched by her recognition of the importance of family for both inspiration and practical support in politics.

My hon. Friend the Member for Peterborough (Andrew Pakes) spoke about his Co-operative and trade union values, which I think many of us Labour Members share. I did not know until he spoke about the connection between Peterborough and mustard, so that is something I have learned today. I thought that his focus on the promise of new towns really sums up our sense of optimism for the future. There is the idea of being proud of one’s heritage, and honest about the challenges that we face, but he is also ready to achieve more in the future with a Government who support him. I wish him great stability in his seat.

The hon. Member for Maidenhead (Mr Reynolds) gave a particularly rich history of his constituency, which went from bridges to “Carry On” movies, and he also mentioned the Spice Girls. I think a Spice Girls CD was the first I ever bought, but he may not know what a CD is. That sums up the different perspectives we come from.

My hon. Friend the Member for West Ham and Beckton (James Asser) spoke about the Royal Docks, where I spent much time in a previous role working at City Hall; I saw the great potential that that area of the capital city has. He eloquently set out the combination of heritage and diversity, past and present, that makes his constituency such a lively and wonderful place to represent. I make him an offer: when he is jumping on the Elizabeth line to visit the hon. Member for Maidenhead, he can stop off at West Ealing to say hello to me.

The hon. Member for Ynys Môn (Llinos Medi) spoke honestly about the importance of keeping people in this place on their toes. That is right; the electorate do keep us on our toes, and one of the great benefits of our system is the way in which we are brought down to earth every time we go back to our constituencies on Thursdays or Fridays. However great and important the debates in this place are, when we knock on that door or sit down in our surgery, we are brought right back down to earth. It is a great feature of our political system, and she was right to draw attention to it.

My hon. Friend the Member for Kettering (Rosie Wrighting) spoke about how proud she was of the history of the place that she now represents and where she grew up. I was very moved to hear her speak about her mum’s role as a local youth worker, and how that inspired her to do what she is doing in life. I wish her well as one of the youngest MPs in this place.

My hon. Friend the Member for Wirral West (Matthew Patrick) spoke about the natural beauty of his constituency—he was not the first Member to do so today—and the passion of the people there. His comments about politics being as much about listening as speaking were particularly thoughtful. We should all bear that in mind in this place. He made an important point about learning from those with whom we disagree, or maybe only appear to disagree, and about breaking down barriers through listening and having conversations.

My hon. Friend the Member for York Outer (Mr Charters) spoke about businesses and voluntary projects in his constituency. He underscored how important it is that taxpayers’ money is treated with respect. I know that the residents of York Outer will be very well served by the excellent new MP we heard from today.

My hon. Friend the Member for Earley and Woodley (Yuan Yang), whom I enjoyed campaigning with during the general election, managed to inject some humour into economics, which is quite an achievement for a maiden speech. I am not even going to begin to try to replicate that in my comments just now, but she spoke passionately about the importance to those in her constituency of having access to nature and affordable housing. I know from what she said, particularly about her personal experience, that she will be a true champion for breaking down barriers to opportunity.

Finally, we heard from my hon. Friend the Member for Falkirk (Euan Stainbank), and it was worth the wait to hear his wonderful speech. He gave a fantastic whistle-stop tour of his constituency, and made many excellent recommendations of where to eat and drink next time we are in the area. What really came across is how connected he is to the community he represents, through his neighbours, his friends and his family. He used a phrase that sums up well what I and other Government Members want to do: unite and serve.

Those were all the maiden speeches we had today. It was a truly excellent tour of not just the country, but the talent we have in this place following the general election. I wish all hon. Members very well for however many years they spend in this place.

We heard from other Members about the substance of the Bill, including the shadow Ministers. They both seemed a bit confused about whether they support the OBR and the Bill. I am glad that they confirmed that they support the Bill and will not vote against it, but at one point the hon. Member for Grantham and Bourne (Gareth Davies) seemed to defend Liz Truss over her handling of the economy. He must be pretty much the last person in the country willing to do so; it was certainly brave of him. We Government Members are clear on why the OBR is so important and what its role should be. The Bill sets out to strengthen that.

The hon. Gentleman asked what the purpose of the fiscal lock might be. The fiscal lock will prevent the sidelining of the OBR by giving it the power to start an assessment if the Government announce fiscally significant policies without one. I remind him that the current shadow Chancellor said, at the time of the disastrous mini-Budget, that some of the difficulties were caused by the lack of a forecast, so this is something that the Opposition agree with.

The shadow Minister also asked about the definition of an emergency. We are very clear that in emergencies—for instance, during the pandemic—it may be necessary for the Government to take rapid action. In those cases, it would not be appropriate to hold back the response to the emergency until a forecast could be produced. Finally, he asked whether the OBR reports triggered by the fiscal lock will be published. I can answer him simply: they will. That is set out in section 8 of the original Budget Responsibility and National Audit Act 2011.

I welcome the support from the Lib Dem spokesperson, the hon. Member for Richmond Park (Sarah Olney), for the Bill. She asked about the definition of “significant”, a point also raised by my hon. Friend the Member for Walthamstow (Ms Creasy). The threshold set out in the draft charter for budget responsibility, which we have on the gov.uk website, is 1% of GDP in any single financial year. The purpose of the legislation is to prevent large irresponsible fiscal announcements that could undermine economic stability, and that requires a threshold targeted at fiscally significant announcements. That is why we have chosen that figure in the draft legislation and the draft text published on gov.uk.

Let me mention two other Members who spoke in the debate. I welcome the support of the hon. Member for Angus and Perthshire Glens (Dave Doogan) for the Bill. I think that his only criticism was one word in the terminology, and we can probably live with that. He said that he was nauseous from hearing us talk about being a Government of service, but he may have to get used to feeling nauseous, because we will proudly be a Government of service every day that we have the honour to serve.

Finally, I am glad that this is not an exceptional debate in which the hon. Member for Strangford (Jim Shannon) does not make an intervention. I welcome his support for the Bill, and for the Government’s wider actions in resolving the junior doctors’ industrial dispute. I reassure him that, like my right hon. Friend the Chief Secretary to the Treasury, I recognise the importance of working with political representatives from all nations in the UK.

As my right hon. Friend said at the beginning of this debate, a crucial first step to achieving sustained economic growth is delivering economic stability. This Bill will help provide that stability and ensure that fiscal responsibility is not only embedded in our approach to government, but locked into how government works from this point on. It will make sure that there is always proper scrutiny of the Government’s fiscal plans, reinforcing credibility and trust, and making sure that no Government can ever again play fast and loose with the public finances. The Bill is a key step in fixing the foundations of our country as we set out to get the economy growing and to make families across Britain more secure and better off.

We now know that the Conservatives called the election to run away from the problems that they had covered up, rather than taking the tough decisions to fix them. While they may have run away from the problems that they created, they cannot run away from their record in office. People in Britain will not forget the last Government’s recklessness in 2022, which showed just how much damage unfunded spending commitments can cause. Budget responsibility will never be optional under Labour, as it was under the Conservatives. We have brought fiscal responsibility back into the heart of government, and we will hardwire it into law through our fiscal lock. That is what this Bill will achieve. This Bill will draw a line under the economic recklessness of recent years and make it clear that it must never be allowed to happen again. Budget responsibility underpins our national mission to make people across Britain more secure and better off. For that reason and others, I commend this Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Budget Responsibility Bill: Programme

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Budget Responsibility Bill:

Committal

(1) The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee, on Consideration and on Third Reading

(2) Proceedings in Committee shall (so far as not previously concluded) be brought to a conclusion four hours after their commencement.

(3) Any proceedings on Consideration and proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion five hours after the commencement of proceedings in Committee of the whole House.

(4) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on Consideration or to proceedings on Third Reading.—(Jeff Smith.)

Question agreed to.

Budget Responsibility Bill: Money

King’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Budget Responsibility Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred by the Treasury in consequence of the Act.—(Jeff Smith.)

Question agreed to.

Business of the House (Today)

Ordered,

That at today’s sitting, notwithstanding the provisions of Standing Order No. 122B, the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of the Prime Minister, Rishi Sunak and Ed Davey relating to Select Committees not later than one hour after the commencement of proceedings on the Motion for this Order; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; proceedings on that Motion may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Lucy Powell.)

Budget Responsibility Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
Committee of the whole House
Wednesday 4th September 2024

(1 month ago)

Commons Chamber
Budget Responsibility Act 2024 Read Hansard Text Watch Debate Amendment Paper: Committee of the whole House Amendments as at 4 September 2024 - (4 Sep 2024)

This text is a record of ministerial contributions to a debate held as part of the Budget Responsibility Act 2024 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

It is an extraordinary privilege to represent Northampton North in this place. I will continually endeavour to live up to that honour for as long as I am here.
Darren Jones Portrait The Chief Secretary to the Treasury (Darren Jones)
- View Speech - Hansard - - - Excerpts

It is a pleasure to serve under your chairship, Ms Nokes. May I start by congratulating hon. Friends and others on delivering their maiden speeches? It has been a pleasure to be in the Chamber to hear them this afternoon. They will clearly be great champions for their constituencies.

I will take a few moments to remind the House of why we are taking forward the important clauses in the Bill, and to set out the Government’s views on the proposed amendments. At the general election, the Government received a mandate for economic growth. That is the only route to improving prosperity, and it is now our national mission. A crucial first step to achieving it is to deliver economic stability. We have seen what happens without stability: at the 2022 Conservative mini-Budget, huge unfunded fiscal commitments were made without proper scrutiny, and key economic institutions such as the Office for Budget Responsibility were sidelined. That is why we have made a commitment in our manifesto to a fiscal lock that will strengthen the role of the OBR, and why we have taken quick action to deliver on that commitment. That will reinforce credibility and trust by preventing large-scale unfunded commitments that are not subject to an independent fiscal assessment, and proves that we are a responsible Government who will not play fast and loose with the public finances as the previous Government did.

The Bill sets out the legal framework for the operation of the fiscal lock, and builds on the Budget Responsibility and National Audit Act 2011. In line with that established legal framework, some of the technical detail underpinning the fiscal lock will be set out via an upcoming update to the charter for budget responsibility, a draft of which the Treasury has published to support scrutiny of the Bill today.

I will now talk through the Bill’s two clauses. The first is the main substantive clause, setting out the operation of the fiscal lock. It introduces a new section 4A into part 1 of the Budget Responsibility and National Audit Act 2011, which relates to budget responsibility and was used to legally establish the OBR.

Clause 1 makes five key changes. First, new subsection (1) of section 4A guarantees in law that from now on, every fiscally significant change to tax and spending will be subject to scrutiny by the independent OBR. It will require that before a Government Minister makes any fiscally significant announcement to Parliament, the Treasury always requests that the OBR prepare an economic and fiscal forecast. This builds on existing legal frameworks requiring the OBR to produce at least two forecasts per year. Importantly, the OBR’s assessment should include the extent to which the Government are meeting their fiscal mandate. That requirement applies when two or more announcements are made and the combination of measures is fiscally significant, irrespective of whether the measures are announced at the same time. It will also apply separately to costs and savings, so that those cannot be offset against each other.

New subsection (2) strengthens the role of the OBR by requiring it to produce an independent assessment if it judges that the fiscal lock has been triggered. If a fiscally significant announcement is made without the Treasury having previously requested a forecast, the OBR is required to inform the Treasury Committee of this House of its opinion, and then prepare an assessment as soon as is practicable.

New subsection (3) defines a measure or combination of measures as “fiscally significant” if they exceed a specified percentage of GDP. In line with the existing legal framework, the precise threshold will be set via an update to the charter for budget responsibility, a draft of which will be published on gov.uk. The threshold level itself will be set at announcements of at least 1% of nominal GDP in the latest forecast—as an example, this year, that 1% threshold would be £28 billion.

New subsection (4) ensures proper scrutiny of the Government’s fiscal plans without preventing them from responding to emergencies such as the covid-19 pandemic. It sets out that the fiscal lock does not apply in respect of measures that are intended to have a temporary effect and are in response to an emergency. The charter will define “temporary” as any measure that is intended to end within two years. To safeguard against this subsection being used to avoid proper scrutiny, as set out in the updated charter, the OBR will have the discretion to trigger the fiscal lock and prepare a report if it reasonably disagrees.

Finally, new subsection (6) prevents any future Government from choosing to ignore the fiscal lock by simply updating the charter for budget responsibility alongside a fiscally significant announcement. It achieves this by requiring the Government to publish any updates to the detail of the fiscal lock, such as the threshold level at which it is triggered, at least 28 days before the updated charter is laid before Parliament.

Clause 2 sets out when the Bill will come into force and to whom it applies. Subsection (1) confirms that it deals with reserved or excepted matters, and that its provisions extend and therefore apply to England, Wales, Scotland and Northern Ireland. Subsections (2) and (3) allow for the commencement of the legislation to occur at the appropriate time, as is usual practice. We expect this will take place ahead of the upcoming Budget on 30 October.

I will now turn to the amendments that right hon. and hon. Members have tabled.

Karl Turner Portrait Karl Turner (Kingston upon Hull East) (Lab)
- Hansard - - - Excerpts

Before my right hon. Friend does so, will he give way?

Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

Briefly, yes.

Karl Turner Portrait Karl Turner
- Hansard - - - Excerpts

Is this Bill not designed to prevent the recklessness of the previous Tory Government, who effectively crashed the economy, leaving this new Labour Government with the responsibility of putting things right?

Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

My hon. Friend has hit the nail on the head. Indeed, I might go so far as to say that that was one of the reasons we achieved such a large mandate at the last general election, with so many hon. Friends on the Government Benches. We will never play fast and loose with the economy, as Members on the Conservative Benches did, and this Bill will prevent that from happening again in the future.

I start with amendments 9 and 10, tabled by the shadow Chancellor. They would require the OBR to publish a report whenever His Majesty’s Treasury announces new fiscal rules. The purpose of the Bill is to ensure that no Government can make large-scale announcements of tax and spending without being subject to independent assessment. The Government’s robust fiscal rules will support economic stability, but do not change tax and spending. It is those decisions that matter, as we saw when the previous Conservative Government announced £45 billion of unfunded commitments in the 2022 mini-Budget.

Andrew Griffith Portrait Andrew Griffith
- Hansard - - - Excerpts

Will the Minister give way?

Andrew Griffith Portrait Andrew Griffith
- Hansard - - - Excerpts

The Minister can answer this briefly as well. Could he confirm that he has no plans to change the fiscal rules?

Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

The hon. Gentleman is enjoying himself, but he knows the answer: wait for the Budget.

The amendments from the official Opposition are therefore not necessary. To answer the question from the shadow Financial Secretary, the hon. Member for Droitwich and Evesham (Nigel Huddleston), as I have been invited to do so, the Chancellor has already confirmed that the Government will set out the precise details of our fiscal rules at the Budget on 30 October, alongside an updated OBR forecast.

amendments 6 and 7, tabled by my hon. Friend the Member for Walthamstow (Ms Creasy), focus on the definition of “fiscally significant” measures to which the fiscal lock will apply. They would extend the definition to include measures that have a cumulative effect on public sector net debt or contingent liabilities. I welcome my hon. Friend highlighting this issue, on which I know she has worked for many years. The draft charter text states that measures will trigger the lock when the combined costing is at least 1% of GDP in any year, and specifically:

“The costing of a measure is the direct impact of a policy decision on the public finances”.

It is difficult to set and interpret a threshold consistently for contingent liabilities as they can often be large in maximum exposure, but low in expected or reasonable worst-case losses. Effective management of contingent liabilities is important, and transparency is key to good fiscal management. The Government plan to announce new significant contingent liabilities at fiscal events to make sure there is transparency with Parliament. We will of course continue to notify Parliament of new contingent liabilities, as set out in “Managing Public Money”.

The amendments would also place a condition on policies with a cumulative impact on public sector net debt, and my hon. Friend noted public-private partnerships as an example. She was referring to PFI and PF2 models, which the previous Government had no longer proceeded with, and there has been no change to this policy. As the Chancellor said in her Mais lecture earlier this year, we will also report on wider measures of public sector assets and liabilities at fiscal events to ensure transparency across the whole balance sheet, which includes non-debt liabilities. Reporting transparently on the Government’s stock of contingent liabilities is key to ensuring we do not take excessive risk. I can therefore confirm today that the Government will publish a report on our contingent liabilities. I expect the contingent liability central capability to do this in early 2025. Having said all that, I recognise the issues my hon. Friend raises, and I will arrange to meet her to discuss them further.

Moving on to the Liberal Democrat amendments, amendment 2 was tabled by the hon. Member for Richmond Park (Sarah Olney). As she said, it would enable the OBR to notify the independent adviser on Ministers’ interests if the fiscal lock was triggered. I remind hon. Members that the purpose of this Bill is to ensure that never again do we find ourselves in a situation, like at the 2022 Liz Truss mini-Budget, in which fiscally significant measures are announced without accompanying OBR analysis. If a future Government were to act in this way, the Bill provides a clear remedy. The OBR is empowered to independently notify the Treasury Committee and to produce its own report. This would be available for full scrutiny by stakeholders and Parliament, which would be able to hold Ministers to account in the normal way. We therefore do not consider the amendment necessary.

Amendment 1, also tabled by the Liberal Democrats, would broaden the definition of fiscally significant measures to cover anything that is likely to have an impact on the cost of Government borrowing, interest rates or economic growth. The Bill is focused on preventing irresponsible large-scale fiscal announcements that could undermine macroeconomic stability, such as at the mini-Budget. To support that, we need clear and robust legal frameworks that ensure the provisions are triggered only when appropriate. This requires precise definitions that everyone, including the OBR in particular, can understand clearly and work with practically. It would therefore not be helpful, in the Government’s view, to have a broader, vaguer definition that might repeatedly trigger the fiscal lock under many different circumstances.

Amendments 3 and 4 would require the Treasury to consult the OBR and the Treasury Committee before the charter can be updated for the purposes of the fiscal lock, and to publish a report on the outcome of any such consultations. It is of course important that the views of the OBR and of Parliament are taken into account when making changes to the charter. However, I hope the hon. Member will accept that it will not be necessary to set out this specific process in primary legislation, because the Bill already includes an important safeguard on the fiscal lock, which is the requirement that any changes to the charter for budget responsibility are published in draft at least 28 days before they are laid in the Commons. That will ensure that the OBR, the Treasury Committee, this Parliament and all stakeholders will have a clear opportunity to make representations to the Treasury and to publish their views, as they see fit.

Amendment 5, tabled by the hon. Member for North Herefordshire (Ellie Chowns), would require the OBR to take net zero targets into account when preparing a report on fiscally significant announcements. Strong legal frameworks are already in place in the Climate Change Act 2008 to support the transition to net zero in 2050. The Act legislates for interim five-year carbon budgets, and requires the Government to report on those periodically. Parliament and its Select Committees already scrutinise that in great detail. The Green Book, the Treasury’s guidance on how to appraise policies, projects and programmes, requires Departments to assess the climate and environmental impacts of policy proposals, with major bids and proposals at fiscal events being assessed accordingly in that way. We therefore do not consider the amendment to be necessary.

Ellie Chowns Portrait Ellie Chowns
- Hansard - - - Excerpts

Does the Minister agree that having committed to give a net zero mandate to all relevant regulators, the OBR is indeed a highly relevant regulator?

--- Later in debate ---
Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

And it is equipped to do the job it is supposed to do, alongside the other regulatory body that holds the Government to account, the Committee on Climate Change.

In conclusion, I hope I have been able to provide some assurances and that hon. Members will be content to retract their amendments. If not, I urge the House to reject them. I thank other Members for their contributions to the debate. I gently invite the hon. Member for Arundel and South Downs (Andrew Griffith) to reflect on his own party’s record in crashing the economy through unfunded tax cuts, losing control of public spending and ruining family finances, before offering advice to this Government on fiscal responsibility. I say to the SNP spokesperson, who is not in his place, that I was surprised to see so many discredited Conservative party lines to take in his speech. Who knew that the SNP and the Tory party were one and the same thing?

With this Labour Government our commitment to fiscal discipline and sound money is the bedrock of all our plans. The Bill will guarantee in law that from now on every fiscally significant change to tax and spending will be subject to scrutiny by the independent OBR. That delivers on a key manifesto commitment to provide economic stability and sound public finances by strengthening the role of the independent OBR. That is a crucial first step to achieve sustained economic growth, and I commend the Bill to the House.

Nigel Huddleston Portrait Nigel Huddleston
- View Speech - Hansard - - - Excerpts

I will not detain the House long by repeating the arguments that I made in my opening comments, but I am disappointed by the Minister’s response, and in particular by his refusal to accept our amendments. It is alarming that he is refusing to do so because, as I outlined, I believe they are consistent with the goals of the Bill overall, and I think the credibility of the Bill will be seriously undermined if it does not include the fiscal rules. I like the Minister a lot. We go back a way and have always had civil conversations, but if he does not believe or consider the level, type and definition of debt to be “fiscally significant”, then with the greatest respect perhaps the Treasury is not the right home for him. They are transparently fiscally significant, and an important part of the consideration we are talking about today.

Darren Jones Portrait Darren Jones
- View Speech - Hansard - - - Excerpts

I thank the hon. Gentleman for giving way, and for inviting me to suggest whether I should try to find a job in another Department. I just point out that, having arrived at the Treasury, I have seen the impact of fiscally significant levels of debt after 14 years of the Conservative Government. Has he got anything to say to the House on that matter?

Nigel Huddleston Portrait Nigel Huddleston
- Hansard - - - Excerpts

Yes, I have indeed. As I outlined in my original statement, the arguments the right hon. Member is making do not stack up with the facts. The economic circumstances that Labour inherited are better in many areas than those we inherited from them back in 2010. The economy is the fastest growing in the G7. On unemployment, every Labour Government since the second world war has increased it while in power, for us to then clear up and reduce it when we take over. Inflation was lower when Labour took power then when we inherited it, and annual debt was higher when we took over in 2010.

Labour Members keep saying all those things, but the challenge is that it does not stack up with the facts. They make arguments about the level of debt, as I outlined earlier, but they have already announced £10 billion for inflation-busting salary increasing for their union mates, £8 billion on energy provisions, and £7 billion on the national wealth fund. That is £25 billion of additional money that they have spent. If there is a black hole in the finances, it is clearly one of their own making by the announcements they have made since coming into government. That £25 billion is a huge amount of money, but I will finish discussing those points, because we had this debate earlier.

Nigel Huddleston Portrait Nigel Huddleston
- Hansard - - - Excerpts

I will not give way at the moment, because I want to move on to some more positive things.

--- Later in debate ---
16:52

Division 10

Ayes: 109


Conservative: 105
Democratic Unionist Party: 2
Labour: 1
Independent: 1

Noes: 366


Labour: 359
Independent: 7
Social Democratic & Labour Party: 1

Amendment proposed: 2, page 1, line 25, at end insert:
--- Later in debate ---
17:09

Division 11

Ayes: 73


Liberal Democrat: 64
Green Party: 4
Plaid Cymru: 3
Alliance: 1
Independent: 1

Noes: 375


Labour: 357
Independent: 6
Social Democratic & Labour Party: 1

Clauses 1 and 2 ordered to stand part of the Bill.
--- Later in debate ---
Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

I beg to move, That the Bill be now read the Third time.

I will not take up too much more time, but I will provide a final reminder of how important this legislation is. At the general election, the Government received a mandate for economic growth. Sustained growth is the only route to improve prosperity and to improve the living standards of the British people. It is now our national mission.

Economic stability is key to achieving this. We have seen what happens without it, when huge, unfunded fiscal commitments are made without proper scrutiny and when key economic institutions such as the OBR are sidelined. We cannot let ourselves get into that position again. Unfunded, unassessed spending commitments not only threaten the public finances, they can threaten people’s incomes and mortgages, as we saw under the previous Government.

I therefore encourage Conservative Members—who have told us today that, after 14 years of Conservative government, the economy has never been so good—to reflect, if only for a moment, on why they lost all credibility for economic competence and suffered the worst election result in their history.

Once again, I congratulate all my hon. Friends and other hon. Members on their excellent maiden speeches today. I thank hon. and right hon. Members on both sides of the House for their contributions, and I thank the Clerks and officials who have supported the Bill’s rapid passage.

The Budget Responsibly Bill forms a small but vital part of our plan to restore economic stability and deliver economic growth. For these reasons, I commend it to the House.

Judith Cummins Portrait Madam Deputy Speaker (Judith Cummins)
- Hansard - - - Excerpts

I call the shadow Minister.

Alan Mak Portrait Alan Mak (Havant) (Con)
- View Speech - Hansard - - - Excerpts

I thank everyone who has contributed to the debates on the Bill, both today and before the summer recess, especially new Members who have made their maiden speech: the hon. Members for Loughborough (Dr Sandher), for Portsmouth North (Amanda Martin), for Swindon North (Will Stone), for Chelmsford (Marie Goldman), for Southend East and Rochford (Mr Alaba), for Woking (Mr Forster), for Rother Valley (Jake Richards), for Wokingham (Clive Jones), for Dudley (Sonia Kumar), for Rochester and Strood (Lauren Edwards), for Plymouth Moor View (Fred Thomas) and for Northampton North (Lucy Rigby). They all spoke incredibly well, with passion and eloquence, and we wish them well for their time in the House.

We Conservatives believe that sound public finances, fiscal responsibility and independent forecasts are the foundation of economic stability, which is why it was a Conservative Government who created the OBR more than a decade ago, and it is why today we tabled our amendments to improve the Bill and stop Labour moving the goalposts on the fiscal rule. By voting against our sensible proposal, Labour Members have shown they are not serious about our public finances. What are they trying to hide? It is clear that the purpose of the Bill is to distract everyone from Labour’s economic record and pave the way for tax rises in the autumn Budget.

Let us examine Labour’s economic record. The party has been in government for just nine weeks and has already carried out nine acts of economic vandalism. It has removed the winter fuel allowance from 10 million pensioners despite promising not to; caved in to its union paymasters by agreeing inflation-busting pay rises; failed to commit to investing 2.5% of national income on defence; cancelled vital infrastructure upgrades on the A27 and A303; cut funding for a vaccine manufacturing plant that would protect our health; imposed Whitehall diktats to concrete over our green spaces; stopped Conservative plans to build 40 new hospitals; scrapped funding for a next-generation supercomputer, undermining our status as a tech superpower; and appointed Labour donors to senior civil service jobs without open competition. Nine weeks, nine acts of economic vandalism.

We know there is more harm to come, with Labour’s autumn Budget set to raise taxes. During the election campaign, Labour promised over 50 times not to raise people’s taxes, but the Labour Government are planning to do just that. It will be hard-working people, pensioners and businesses who will pay the price. May I invite the Chief Secretary to the Treasury to return to the Dispatch Box to rule out raising taxes on working people, such as drivers, savers and business owners? At the same time, will he rule out changing the fiscal rules to allow for more Government borrowing and debt?

Darren Jones Portrait Darren Jones
- Hansard - - - Excerpts

I always welcome the opportunity to return to the Dispatch Box, and I thank the shadow Minister for inviting me to do so. Opposition provides an opportunity for reflection. While he is offering his thoughts on our two months in office—two months of great relief for the British people—does he have anything to say about his 14 years in office before the election?

Alan Mak Portrait Alan Mak
- Hansard - - - Excerpts

I think the answer from the Chief Secretary to the Treasury is no, which confirms everything we already knew. It means that the people can never trust Labour with our economy, that Labour will raise taxes and cut investment at every opportunity and that Labour’s honeymoon is well and truly over.

Question put and agreed to.

Bill accordingly read the Third time and passed.

House of Commons Commission

Resolved,

That

(1) in pursuance of section 1(2)(d) of the House of Commons (Administration) Act 1978, Rachel Blake be appointed to the House of Commons Commission, and

(2) in pursuance of section 1(2B) of that Act, the appointment of Shrinivas Honap as an external member of the Commission be extended to 30 September 2026.—(Lucy Powell.)

Budget Responsibility Bill

(Limited Text - Ministerial Extracts only)

Read Full debate
2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024

(1 month ago)

Lords Chamber
Budget Responsibility Act 2024 Read Hansard Text Watch Debate Amendment Paper: Committee of the whole House Amendments as at 4 September 2024 - (4 Sep 2024)

This text is a record of ministerial contributions to a debate held as part of the Budget Responsibility Act 2024 passage through Parliament.

In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.

This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here

This information is provided by Parallel Parliament and does not comprise part of the offical record

Moved by
Lord Livermore Portrait Lord Livermore
- View Speech - Hansard - - - Excerpts

That the Bill be now read a second time.

Lord Livermore Portrait The Financial Secretary to the Treasury (Lord Livermore) (Lab)
- Hansard - - - Excerpts

My Lords, at the general election, our manifesto made it clear that sustained economic growth is the only route to improving the prosperity of our country, raising living standards, and sustainably funding public services. That is why it is our central economic mission.

On her first day in the Treasury, the Chancellor received new economic analysis from Treasury officials on the lost growth of the past 14 years. This analysis showed that, had the UK economy grown at the average rate of other OECD economies, it would now be over £140 billion larger. This could have brought an additional £58 billion in tax revenues in the last year alone—money that could have revitalised our schools, hospitals and other public services. We have therefore urgently begun the work to deliver on the mandate for change delivered by the British people at the election to fix the foundations of our economy, rebuild Britain and make every part of our country better off.

Our approach to growth rests on three pillars: stability, investment and reform. We have set out ambitious reforms, most importantly to the planning system, the single biggest obstacle to our country’s economic success. We have ended the ban on onshore wind and set out reforms to the skills system. With regard to investment, we have established the national wealth fund, committed to an industrial strategy council, and begun the creation of GB Energy. But the first, and most critical pillar, is economic stability—it is the rock on which all else must be built and the essential precondition for growth.

Over the last 14 years, with five Prime Ministers and seven Chancellors, instability has deterred investment, undermined family finances and, most importantly, held back growth. Many of the crises we faced during that time were of course global in origin—pandemic, war and an energy shock—but other countries faced those same shocks. The reason why we in the UK were hit harder than other comparable countries can be explained only by the choices made by the previous Government here at home: austerity, which choked off investment; a rushed and ill-conceived Brexit deal; and the disastrous Liz Truss mini-Budget, which crashed the economy and sent mortgage rates spiralling.

We believe that stability must begin with respect for our economic institutions. For much of the UK’s history, the strength of our economic institutions has bestowed credibility in international markets and underpinned our economic success. Politicians who seek to undermine those strengths, as we saw in the last Parliament, play a dangerous game. Under this Government, the Bank of England’s Monetary Policy Committee will continue to have operational independence in the pursuit of its primary objective of price stability, and, in line with our manifesto, we will support and strengthen the Office for Budget Responsibility, hence the Bill we are debating today.

The OBR was, of course, introduced by a Conservative Chancellor to deal with a lack of independence in forecasting and the problems that had caused. It was a commendable move, bringing greater transparency and independent scrutiny to fiscal policy. But while the previous Government then went on to undermine it—Liz Truss notoriously saying that she wanted to

“see the back of the OBR”—

the Labour Party continued to support it. Now, in government, we will strengthen it.

This Bill therefore fulfils a simple but important step to help restore economic stability: it brings transparency and independent scrutiny into law by ensuring that every fiscal event that makes significant changes to taxation or spending will be subject to an independent report from the OBR. In doing so, it delivers on a manifesto commitment.

Let us be clear about why this Bill is needed. While the existing fiscal framework requires at least two OBR forecasts a year, there is currently no requirement on the Treasury to subject announcements on all fiscally significant measures to independent OBR scrutiny. In effect, that means there are times when the Government can make fiscally significant announcements while opting out of both transparency and scrutiny. This was a key factor in the disastrous Liz Truss mini-Budget, which did so much damage to our economy and to households, who are still paying the price for it today.

The previous Government knew the measures they were taking were unfunded and unaffordable, but as they were not bound to a forecast, they wilfully prevented one from taking place. This absence of scrutiny was a key factor in the adverse market reaction that followed. As the now shadow Chancellor said at the time, the mini-Budget damage was in part

“caused by the lack of a forecast””.—[Official Report, Commons, 17/10/22; col. 395.]

This cannot be allowed to happen again, so this Budget Responsibility Bill takes five important steps.

First, the Bill requires that, before the Government make any fiscally significant announcement in Parliament, the Treasury must ask the OBR to prepare a report which takes that announcement into account. This builds on the existing process whereby the Chancellor commissions the OBR for an economic and fiscal forecast to accompany a fiscal event. It guarantees in law that, from now on, every fiscally significant change to tax and spending will be subject to independent scrutiny from the OBR.

Secondly, the Bill gives the OBR new powers independently to decide to produce a report if it judges the measures in a fiscal event to be fiscally significant. If a fiscally significant announcement is made without the Treasury having previously requested a forecast from the OBR, the OBR is required to inform the Treasury Committee in the House of Commons of its opinion, and then prepare a report as soon as is practicable.

Thirdly, the Bill defines a measure, or combination of measures, as “fiscally significant” if they exceed a specified percentage of GDP. The Charter for Budget Responsibility will then set the precise threshold. Setting the threshold in this way provides clarity for the OBR and external stakeholders about what constitutes a fiscally significant announcement and ensures that the Government can set it at the right level going forward, recognising economic conditions. The Treasury has published a draft of the updated charter. This notes that the threshold level will be set at announcements of at least 1% of nominal GDP in the latest OBR forecast.

Fourthly, the Bill ensures that these arrangements do not apply to Governments responding to emergencies. The Bill does this by not applying in respect of measures that are intended to have a temporary effect and which are in response to an emergency. The charter will define “temporary” as any measure that is intended to end within two years. This recognises that it is sometimes reasonable, as it was during the pandemic, for the Government to act quickly and decisively without an OBR report, if that is needed in response to a shock. Of course, in emergencies it may be appropriate for the Chancellor to commission a forecast from the OBR to follow measures that need to be announced or implemented rapidly, and that would happen in the usual way. Alongside any such announcement, the Treasury will be required to make clear why it considers the situation to be an emergency. As set out in the updated charter, the OBR will have the discretion to prepare a report if it reasonably disagrees.

Fifthly and finally, the Bill requires the Government to publish any updates to the detail of these arrangements, such as the threshold level at which they are triggered, in draft form at least 28 days before the updated charter is laid before the House of Commons. This is an essential safeguard in the Bill, preventing any future Government from choosing to ignore these arrangements by updating the charter without clear parliamentary consent. In line with this Bill, and as the Chancellor announced in July, she has commissioned a full forecast to accompany the Budget on 30 October, following the important principle that significant fiscal policy decisions should be made at a fiscal event and accompanied by an independent OBR report.

In the Chancellor’s July Statement to Parliament, and in light of the scale of the overspend left by the previous Government, of which the OBR has confirmed it had not been informed, she also announced additional measures to strengthen the fiscal framework. These require the Treasury to share with the OBR its own assessment of immediate public spending pressures, enshrining that rule in the Charter for Budget Responsibility and establishing that spending reviews will take place every two years, with a minimum planning horizon of three years, to avoid uncertainty for departments and to bring stability to our public finances.

The changes introduced in this Bill are an important step in bringing much-needed stability to our economy. By empowering the OBR and ensuring that an independent report will accompany all fiscally significant announcements, it will improve transparency and accountability. Economic stability is central to economic growth—objectives that I hope will be shared across your Lordships’ House. I beg to move.

--- Later in debate ---
Lord Frost Portrait Lord Frost (Con)
- View Speech - Hansard - - - Excerpts

My Lords, I find this a peculiar Bill. There are a number of odd things about it.

First, as my noble friend Lady Noakes mentioned, it seems odd that this is a money Bill. I do not challenge the decision, obviously, but it does not seem to affect the Government’s powers to raise taxes or spend in any way. I cannot help but notice that, as far as I can tell, the original Budget Responsibility and National Audit Act, which created the OBR, was not a money Bill, so it is odd that this one is. I do not question the decisions on this point but it does seem odd; I agree that it would have benefited from more scrutiny.

This feels more a constitutional Bill in some ways, but it is weak there too. The Minister billed it as a lock on government actions, and others have described it as such, but it does not actually stop the Government doing anything; it only requires the OBR to write a report if they do so, so it seems misconceived in those terms too. One has to ask what the point of the Bill is. It is, of course, a process Bill, but it is also a political Bill. It is written entirely to give an opportunity for the Government and the Labour Party to contrast their activity with the Liz Truss mini-Budget and the decisions taken in 2022. We have heard plenty of that already in this House today.

I think Labour will find two problems with that. First, as my noble friend Lady Noakes has already mentioned, the Bank itself says that two-thirds of the problem was its own mishandling of the LDI crisis. It is hard to see how, if this Bill had been in force and a report had been required, it would have had any effect on that aspect of the autumn 2022 problems. The other problem that the Government will find is that the world does move on. Their own so-called fiscal black hole, which they have already spent a large time creating, is where attention will move. They may regret this Bill before long, to judge by the Niagara Falls of public money that seems likely to pour out of the Treasury in the months and years to come.

I do not think that we are meant to take this Bill seriously. Outsiders recognise that; the IFS itself says that the proposal is “largely performative”. Even the Resolution Foundation describes its impact as “relatively small”. The real impact of the Bill will be to reinforce the position of the OBR in the constitution, but I am doubtful about that for two reasons.

First, for some of the reasons that have been said, the OBR is not a particularly effective institution. It clearly reinforces the Treasury view of the world. It has a poor record, as others have said and as it itself acknowledges. It is negative about Brexit and it repeats the zombie 4%-cut-to-GDP figure that was produced six years ago on the basis of reports put together before we even left the EU. It is doubtful about incentives and what makes a free economy tick. Forecasting is difficult—people bring their priors to it—but the answer is not to do it better or do more forecasts; the answer is to remove the privileged status of the OBR and the forecasts it gives in our economic decision-making. That is the first reason.

The second is that this Bill forms part of the tendency over the past 20 to 25 years to tie down elected Governments with Platonic guardians who think they know better than Governments. This is an intellectual error that began, reasonably enough, with Bank independence in 1997, but it cannot be extended to every single situation. Just because it is good for running monetary policy does not necessarily make it desirable to have independent controls on fiscal policy, to give independence to one regulator after another or to give independence to institutions with wider economic policy effects, such as the Climate Change Committee and many others. These are very different things. You cannot solve the problems that the country faces by constantly giving further independence to unelected institutions and bureaucratic processes.

I am afraid that this error has time to run yet. It is sapping democracy and will make it more difficult to deal with new economic challenges. I hope that, one day, we will reverse this trend and look at this panoply of constraints on government action with a much more sceptical eye.

--- Later in debate ---
Lord Livermore Portrait Lord Livermore (Lab)
- View Speech - Hansard - - - Excerpts

My Lords, it is a pleasure to close this debate on the Bill. I am grateful to all noble Lords for their contributions and questions.

As promised in our manifesto, we will support and strengthen the Office for Budget Responsibility. This Bill delivers on that simple but important step to help restore economic stability by bringing transparency and independent scrutiny into law, ensuring that every fiscal event which makes significant changes to taxation or spending will be subject to an independent report by the OBR.

Let us remind ourselves why this Bill is needed. Although the existing fiscal framework requires at least two OBR forecasts a year, there is currently no requirement on the Treasury to subject announcements on all fiscally significant measures to independent OBR scrutiny. In effect, that means that there are times when the Government can make fiscally significant announcements while opting out of both transparency and scrutiny. As the noble Baroness, Lady Kramer, said, this was a key factor in the disastrous Liz Truss mini-Budget, which did so much damage to our economy and to households, which are still paying the price for it today.

The previous Government knew that the measures they were taking were both unfunded and unaffordable but, as they were not bound by a forecast, they wilfully prevented one from taking place. That cannot be allowed to happen again. This Bill takes five important steps, which, in combination, will deliver on that commitment.

First, it requires that, before the Government make any fiscally significant announcement to Parliament, the Treasury must ask the OBR to prepare a report which takes the announcement into account. This guarantees in law that, from now on, every fiscally significant change to tax and spending will be subject to independent scrutiny from the OBR. The noble Baroness, Lady Lawlor, suggested that certain announcements should have been accompanied by such a forecast under these arrangements, a question also raised by my noble friend Lord Davies of Brixton and the noble Baroness, Lady Vere of Norbiton.

I will look first at the Chancellor’s July Statement. It did not represent a change to the funding allocated to departments or to borrowing plans. This Bill is aimed at ensuring independent scrutiny of significant fiscal announcements that would represent risks to macroeconomic stability. The threshold is set at 1% of GDP or more in any year. None of the policy announcements mentioned by the noble Baroness would qualify as fiscally significant within the definition of the Bill. However, that 1% is of course cumulative, and, unlike the previous Government at the time of the disastrous mini-Budget, when they wilfully prevented a forecast from taking place, the Chancellor has commissioned the OBR to deliver a full economic and fiscal forecast, which will be presented alongside the Budget on 30 October. This is when the Government will set out their fiscal plans, including how they meet our fiscal rules, in the usual way.

My noble friend Lord Eatwell spoke about those fiscal rules, as did the noble Baronesses, Lady Wheatcroft, Lady Lawlor and Lady Vere, my noble friends Lord Sikka and Lord Liddle and the noble Viscount, Lord Trenchard. The Government’s manifesto set out robust fiscal rules which will ensure that the current budget moves into balance, so that day-to-day costs are met by revenues, and debt must be falling as a share of the economy by the fifth year of the forecast. The Chancellor will set out the Government’s full fiscal plan, including the precise details of those fiscal rules, in the usual way: at the Budget in October, alongside an economic and fiscal forecast produced by the OBR. A revised OBR charter will be published at that point.

To further address the point made by the noble Baroness, Lady Wheatcroft, I point out that the Chancellor said, in her Mais Lecture earlier this year, that she

“will report on wider measures of public sector assets and liabilities at fiscal events, showing how the health of the public balance sheet is bolstered by good investment decisions”.

The noble Lord, Lord Altrincham, asked about the costs of the asset purchase scheme. The OBR provides detailed projections of the underlying cost arising from QT and the impact on different fiscal metrics. The latest OBR forecast for the financial year 2024-25 put HMT transfers to the APF at £34.5 billion. The separation of fiscal and monetary policy is essential, so the Government do not comment on the conduct or effectiveness of monetary policy.

Secondly, the Bill gives the OBR the power to decide independently to produce a report, if it judges the measures in a fiscal event to be fiscally significant. The noble Lord, Lord Frost, raised the question of how much impact this Bill will have, a point also made by the noble Viscount, Lord Trenchard, and the noble Baroness, Lady Vere. As my noble friend Lord Liddle said, we need look back only at the disastrous Liz Truss mini-Budget and at the current cost of the average mortgage—£300 a month higher than before that mini-Budget—to see how serious the impact of sidelining the OBR can be.

Of course, the noble Lord, Lord Moylan, is correct to say that the problems with that mini-Budget went much wider than just the absence of a forecast. As the noble Baroness, Lady Kramer, said, the announcement of £46 billion of unfunded tax cuts led to an unprecedented increase in borrowing costs. As a result, the value of sterling fell to a record low against the dollar, with a near collapse in the pension market. As my noble friend Lord Murphy rightly said, explicitly sidelining the OBR meant that no one knew how any of this would be paid for or how it would impact on the then Government’s fiscal rules. There is no doubt that this contributed to uncertainty in the markets. As the now Shadow Chancellor said at the time, the mini-Budget damage was, in part,

“caused by the lack of a forecast”.—[Official Report, Commons, 17/10/22; col. 395.]

The noble Baroness, Lady Vere, described this Bill as political theatre. However, what is particularly notable is the lack of an apology to the British people from the noble Baroness in her speech this evening for the damage that the Liz Truss mini-Budget did to family finances. I know that they are determined not to apologise, but I am not sure that is a wise strategy. As long as they refuse to do so, they may well continue to pay the electoral price for it.

To address the question from the noble Baroness, Lady Lawlor, and my noble friend Lord Sikka, this Bill will prevent the sidelining of the OBR by giving it the power to start an assessment if the Government announce fiscally significant policies without one. This means that the mini-Budget, and any other fiscally significant announcements like it, would have been subjected to the scrutiny of an independent OBR report. This Bill ultimately is about transparency and scrutiny.

The noble Lords, Lord Frost and Lord Moylan, and the noble Viscount, Lord Trenchard, whom I thank for his kind words, criticised some independent regulators. I respectfully disagree. This Bill ensures transparency and accountability. It does not give the OBR policy-making powers. As my noble friend Lord Sikka and the noble Baroness, Lady Kramer, rightly said, policy is very much for the elected Government. By adding a further level of scrutiny to fiscally significant announcements, this Bill takes nothing away from the power of this Parliament—in fact, greater transparency surely increases accountability. This Bill requires that policy-making is subject to proper scrutiny. Independent scrutiny of the public finances promotes greater accountability to the public, provides certainty for the markets and investors, and supports economic stability. We have seen what happens when the OBR is sidelined—higher interest rates and mortgage misery for millions.

The noble Baronesses, Lady Noakes and Lady Vere, raised the question of the OBR’s accountability. The OBR is accountable to Parliament. The Treasury Committee in the Commons can call in the chair and other OBR members, and both oral and written evidence submitted by the OBR are available on the Parliament website. It must also consent to the appointment of the OBR chair. In addition, a full update to the charter will be published on 30 October alongside the Budget, on which Members in the other place will vote in the usual way.

The noble Lord, Lord Macpherson, and my noble friends Lord Eatwell and Lord Liddle, noted that the Chancellor’s Statement in July set out robust reforms to further increase transparency in the public finances. In the light of the scale of the overspend left by the previous Government, mentioned by my noble friends Lord Hain and Lord Murphy, and the noble Baroness, Lady Wheatcroft, about which the OBR had not been informed, the Chancellor also announced additional measures to strengthen the fiscal framework. These require the Treasury to share with the OBR its own assessment of immediate public spending pressures, enshrining that rule in the Charter for Budget Responsibility and establishing that spending reviews will take place every two years, with a minimum planning horizon of three years to avoid uncertainty for departments and to bring stability to our public finances. The noble Lord, Lord Macpherson, asked about further reforms to the OBR, and I will of course look at his suggestions.

The noble Lords, Lord Altrincham and Lord Frost, and the noble Baroness, Lady Noakes, questioned the OBR’s forecasting record and some of the assumptions that the OBR makes. As my noble friend Lord Chandos said, this Bill concerns the scrutiny and transparency around fiscally significant announcements. However, I note that the IMF has said that the OBR’s analysis

“can be considered as best-practice, and could be used as a benchmark by other advanced countries”.

Meanwhile, the OECD has described the OBR as a

“model independent fiscal institution”.

The OBR’s forecasts for GDP and the public finances have typically been more accurate than the previous forecasts made by the Treasury. As the noble Lord, Lord Altrincham, said, the OBR is required by primary legislation to publish an annual assessment of the accuracy of its forecasts. All previous forecast evaluation reports are available on the OBR’s website.

The third element of this Bill is to define a measure or combination of measures as “fiscally significant” if they exceed a specified percentage of GDP, with the OBR charter then setting the precise threshold at 1% of GDP. The noble Lords, Lord Macpherson and Lord Bilimoria, and the noble Baroness, Lady Vere, discussed the setting of the 1% threshold. The purpose of the legislation is to ensure that large-scale fiscal announcements that could undermine macroeconomic stability cannot take place without independent scrutiny. This requires a threshold that is targeted at fiscally significant announcements. The current threshold will ensure that the provisions are triggered only when appropriate to support macroeconomic stability.

To answer the noble Viscount, Lord Trenchard, and the noble Baroness, Lady Vere, the 1% of GDP threshold is cumulative and treats savings and costs separately. This means that announcements made by government to Parliament in any financial year in the forecast period can be added together and trigger these arrangements. It will not be possible to simply announce savings to offset costs to avoid it. The Treasury will keep track of announcements as they are made over time and share these with the OBR as requested. This is an important part of how these arrangements will hold the Government to account on spending commitments.

Fourthly, this Bill ensures that measures do not apply to responses to emergencies. The Bill does this by not applying in respect of measures that are intended to have a temporary effect and which are in respect of an emergency. The OBR charter will define “temporary” as any measure that is intended to end within two years. In an emergency—for example, during a pandemic such as Covid-19—it may be necessary for the Government to take rapid action. In these cases, it would not be appropriate to hold back the response to the emergency until such time as a forecast could be produced.

My noble friend Lord Davies of Brixton and the noble Baronesses, Lady Kramer and Lady Vere, sought clarity on the definition of “emergency”. Given the unexpected and unpredictable nature of events, it is not possible to set out a precise definition of an emergency in legislation. However, the Bill contains clear limitations to ensure that no Government can inappropriately avoid independent scrutiny on its significant fiscal announcements.

The first of these limitations is that the updated Charter for Budget Responsibility notes that, when the Treasury believes something is an emergency, it would need to make it clear why it considers the situation to be an emergency. Secondly, this can be relevant only for temporary measures which are intended to end within two years. Thirdly, as set out in the updated charter, this will not simply be for the Treasury to decide. The OBR will have the discretion to prepare a report if it reasonably disagrees on whether the situation in question is an emergency. If it were to reasonably disagree, the OBR would be required to notify the Treasury Committee in the House of Commons of its opinion. I repeat that, in emergencies, it may be appropriate for the Chancellor to commission a forecast from the OBR to follow measures that need to be announced or implemented rapidly. That would happen in the usual way.

Finally, the Bill requires the Government to publish any updates to the detail of these arrangements, such as the threshold level at which they are triggered, in draft form, at least 28 days before the charter is laid before the House of Commons. This is a key safeguard in the Bill, preventing any future Government from choosing to ignore these arrangements by updating the charter without clear parliamentary consent.

The noble Baroness, Lady Noakes, and the noble Lords, Lord Moylan and Lord Bilimoria, raised the question of scrutiny of this Bill in your Lordships’ House. As the noble Baroness, Lady Noakes, and the noble Lord, Lord Frost, noted, this is for the Speaker in the House of Commons to determine under the Parliament Act 1911. This Bill focuses on the scrutiny of fiscally significant announcements—tax and spend—which is the remit of the other place. To reassure the noble Viscount, Lord Trenchard, the House of Commons will debate and approve the updated charter.

The changes introduced in this Bill are an important step in bringing much-needed stability to our economy, so that we never again see a repeat of the disastrous Liz Truss mini-Budget and the damage that it did to family finances. By empowering the OBR and ensuring that an independent assessment will accompany all fiscally significant announcements, it will improve transparency and accountability. Economic stability is the rock upon which all else must be built; it is the essential prerequisite for growth. This Bill is an important step as we fix the foundations of our economy, rebuild Britain and make every part of our country better off.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.